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7 Financial Planning Tenets to Abide By

    At its core, financial planning is a game, and just like any game, there are rules you need to follow if you wish to win. That said, there will be odds against you and unforeseen obstacles may rear their ugly heads.

    But no matter how the game goes, your best chances of winning will be to abide by the time-tested rules that govern the game… the tenets of financial planning which will keep you on track regardless of market fluctuations, pandemics, inflation, etc.

    1. You must have a budget

    There’s a quote in Charles Dickens’ book, David Copperfield, “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

    This is old wisdom that still holds true to this day. If your expenses exceed your income, you’ll constantly be in debt. Getting your finances in order will be a Herculean task and you’ll always be behind the 8-ball.

    Create a budget and decide how much you’ll allocate to needs, wants, savings, paying off debt and so on. Stick to this budget and try your best not to deviate from it.

    1. Save 10% of your net income

    Here’s an important point to note – the percentage is not as important as the habit.

    Some people may be so deep in debt that even saving 10% is difficult. If that’s the case, aim for 5% or at the very least, try to save anywhere from $10-$25 a month.

    When you have even a small amount of money set aside, you’ll shift your mindset just enough to go from a mentality of lack to one with a teeny bit of abundance. It’s not much but it’ll make a WORLD of difference.

    If you’ve saved $25 a month for 4 months, you’d have a $100 in savings. This will be a refreshing change from before when you were so broke you barely had anything left before the next paycheck came in.

    As you get better at saving, trim your expenses wherever you can and split the extra between your debt repayment and savings.

    1. Pay off debt quickly

    Being in debt can be a soul-sucking experience. The banks are NOT your friends. They’ll willingly give you the credit cards you want as long as you meet the criteria, but the moment you’re slow to pay up, you’ll see them show their fangs.

    The late payment fees, the interest rates, the calls from the debt collectors, the never-ending bills in the mail will all add stress and pressure on you. It can be a very draining and burdensome experience.

    The best way to avoid this will be to pay your credit card bills in full and on time. At the very least, make the minimum payments punctually so that you don’t incur late fees.

    Create a debt repayment plan for yourself and stick to it. It’ll take time, but you’ll come out of debt slowly but surely.

    If you don’t remedy this problem proactively, you’ll be in financial servitude to the banks for a long time and may even end up filing for bankruptcy.

    1. Don’t be impulsive

    When you have money to invest, do NOT risk it all. Avoid following unsubstantiated ‘tips’ on the market and proceed cautiously. Diversify your portfolio and aim for gradual growth rather than fast wealth which often means riskier investments.

    1. Avoid covetous desires

    Trying to keep up with the Joneses is an almost sure-fire way to financial ruin, especially if your income isn’t substantial. There’s no point in buying what you don’t need, with money you don’t have, just to impress people who don’t care.

    Spend wisely and avoid impulsive purchases.

    1. Increase your income

    Always seek to improve your knowledge and skills so that you bring more value to the marketplace and are rewarded handsomely for it. Almost ALL aspects of financial planning can be improved when your income increases. Whether you’re trying to eliminate debt or save for retirement, earning more will accelerate your progress. So, do whatever you can and do the best you can to earn well.